Q2 2012 San Francisco, California Office Property Sales Analysis

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Q2 2012 San Francisco, California Office Property Sales Analysis

Metro Volume and Pricing

San Francisco’s single property office investment sales surged in the second quarter of 2012, as 17 properties traded for $1.64 billion at a mean price of $487 psf.* It was the highest total dollar value since the third quarter of 2007, at the onset of the financial crisis, and the highest average price since the first quarter of 2009, when only four properties traded. Six major San Francisco properties traded during the quarter, led by the acquisition of the 557,000-square-foot 555 Mission Street by Union Investment Realty GmbH from Tishman Speyer for $446.5 million ($802 psf). Foundry Square I and IV sold for $240 million ($714 psf) and $184.5 million ($795 psf) during the quarter. With this sales surge, 9.7% of the square footage in the West Bay market has sold over the past four quarters.

Top Submarkets

The South Financial District now leads in both square footage sold over the past four quarters at 1.8 million and dollar value sold at $1.1 billion. This submarket also has the highest mean sales price at $618 psf.

Cap Rate Comparisons and Forecasts

The mean cap rate for the second quarter is 6.9%, up 110 basis points from the prior quarter but below the U.S. and West region averages. The rolling 12 month cap rate increased 10 basis points to 6.4%, still the second lowest reading since the second quarter of 2009. Reis predicts the rolling 12 month mean will fall to 6.2% by the end of 2012 and 5.6% by the end of 2015.